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Boots Group PLC Trading & Corporate Development Update - April 7, 2005

This update from Boots Group PLC details their trading performance and corporate developments for the fiscal year 2004/05, forecasting results to align with revised market expectations. It highlights challenges such as lower consumer spending impacting future operating profits and the proposed sale of Boots Healthcare International. The company reaffirms its commitment to returning cash to shareholders, with £1.7bn returned over the last three years, and a planned second share buyback tranche contingent on performance. Future growth strategies focus on renewing operational infrastructure for competitiveness.

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Boots Group PLC Trading & Corporate Development Update - April 7, 2005

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  1. Boots Group PLC Trading and corporate development update 7th April 2005

  2. Sir Nigel Rudd Chairman

  3. Richard Baker Chief Executive

  4. Headlines • BTC and Group performance for 04/05 expected to be in line with revised market forecasts • Lower consumer spending and infrastructure costs expected to lead to lower BTC operating profits in 05/06 • Proposed sale of Boots Healthcare International • Continued return of cash to shareholders

  5. 04/05 Trading update • BTC • Operating profit expected to be in line with March update at £470m • Weak sales in Q4 • Gross margin % -80bp for the year • BHI • Operating profit slightly ahead of expectations at £85m • Group • PBT in line with revised market expectations at £475m Note: All trading results estimated at time of going to press

  6. Boots The Chemists • Tougher retail environment underlines need to change • Improved competitive position in increasingly competitive market • Good progress on renewing operational infrastructure • Moving from unsustainable model to modern, competitive and efficient model

  7. Planning assumptions for 2005/06 • Sales growth expected to remain subdued • LFL growth 0 – 2% • New space contribution 2% • Stable gross margin expected • Continued investment in price • Cost of Goods improvement • Costs expected to be up 6% due to new space and infrastructure renewal

  8. BTC cost growth

  9. Intention to sell BHI • BHI concluding successful 4 year growth strategy • Strong organic growth prospects but significant investment required • Focus Group resources on making BTC modern, competitive and efficient • Completion within 05/06 financial year • Intention to return significant proportion of proceeds to shareholders

  10. Boots Healthcare International • 2004/05 sales £520m, +5.7% on a comparable basis • 2004/05 operating profit £85m • Operating in 130 countries with 2,900 staff • 5 manufacturing plants Nottingham (3), Germany and Thailand Other £140m Nurofen £150m Dermo- Cosmetics £50m Strepsils £90m Clearasil £90m Note: All trading results estimated at time of going to press

  11. Proposed sale and leaseback • 300 secondary properties identified • Expect proceeds in excess of £250m • Plan completion over the summer • Broadly EPS neutral • Proceeds used to pay down short term borrowings

  12. Capital structure and shareholder returns • Clear ongoing commitment to return surplus cash • £1.7bn returned to shareholders over the last three years • Significant proportion of BHI proceeds to be returned to shareholders • 2nd £350m tranche of share buyback to be completed over two to three years – matched to BTC performance • Dividend key element of delivering shareholder returns • Maintain strong investment grade debt rating

  13. Summary • BTC and Group performance for 04/05 expected to be in line with revised market forecasts • Lower consumer spending and infrastructure costs expected to lead to lower BTC operating profits in 05/06 • Proposed sale of Boots Healthcare International • Continued return of cash to shareholders

  14. Boots Group PLC Trading and corporate development update

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